Both arguments miss the important ways in which the recessions the two men inherited are similar and the important ways in which their approaches differed. Both men faced seemingly intractable economic problems with no easy solution, but Reagan understood that curing the nation’s debilitating inflation was going to involve a good deal of short-term economic pain and political unpopularity, and he was prepared to endure that. By contrast, Obama has done everything in his power to avoid painful corrections — at great cost to future taxpayers. It is increasingly evident that his policies have merely put off these corrections or dragged them out, and that we have not avoided them at all. Reagan’s willingness to accept painful and unpopular but necessary economic adjustments — and Obama’s lack of the same fortitude — is the essence of what separates the two men.

I wrote earlier in the summer about the potential motivations for the Pain Caucus, and reliving the glory days of the early 1980s struck me as a an easy answer though it felt unfair after I wrote it. Sadly the reality is even more embarrassing. The comparison between the early 1980s to right now is both terrible and inaccurate. From Richard Koo’s book, The Holy Grail of Macroeconomics: Lessons From Japan’s Great Recession, here’s a chart comparing Japan’s Great Recession to the U.S. early 1980s:

Which one looks more like our situation right now? Koo frames it this way because he is a fan of the structural reforms from the early 1980s, but doesn’t see them as being relevant for Japan’s Recession. He’s right, and it’s not relevant for our situation either. Look at the Mott’s strike, where workers are just trying to keep their current wages in a profitable company and Dr. Pepper Snapple is squeezing them and tell me if you think our biggest problem is that labor is causing supply-side issues? Look at the 10 years, which are hovering at less than 2.6%. Was that on the table back in 1982?

9 Responses to The Pain Caucus Comes to National Review

The comparison they made was in the resolve the leader to do unpopular things (not necessarily painful things). The health care bill was moderately unpopular, but I don’t think there was a majority against the stimulus bill. The editorial’s point (if you read past your excerpt) is that Obama isn’t doing particular things that would be helpful (in the eyes of the editorialist) only because they are unpopular.

It is obvious from context that the “pain” in “painful corrections” is pain to Obama, not to the rest of us. And its funny because the rest of that editorial takes positions critical of the administration that I think are close to yours (e.g. on TARP and housing supports but I’m not sure).

Is your position that the only institution right now that can do anything about bad unemployment is the Fed? The president and the Congress are powerless? To turn this around, your criticism of this editorial suggests you believe president Obama has done enough. Do you believe he’s done enough?

I think it must be so much fun for Republicans to spend eight years creating a mess, then when the new President comes along block everything he does and point the finger of blame at him. I’m sure dunderhead William F. Buckley would be so proud watching this, grinning his ugly grin, speaking a fake British accent with the back of his pen stuck halfway up his nose.

Yes, the Reagan and “W” Bush courage at being “unpopular”: Reagan standing in front of an Irish Pub going “damn those commies” while lowering taxes (which future generations would be forced to make up for) and increasing spending. And “W” Bush standing on a Navy carrier going “Well the Iraq War is over folks, you can go home now. Don’t bother to read the death count next week.” for Mission G.I. Joe Photo-Op while increasing spending on Medicare.

Yes, what daring made with “unpopular” decisions. President Obama must look in utter awe and wonderment at how they found the inner fortitude.

Carter, or rather Volcker, commenced the economic pain while Carter was President. This probably contributed to Carter’s loss to Reagan. Reagan couldn’t do much about Volcker’s policies (some in his administration complained, so he smiled and carried on. National Review is revising history.

bdbd,
Thank you for that. It’s a fact often forgotten. They basically had to raise (or tolerate) the unemployment numbers to get inflation under control. That (Federal Reserve induced) raising of interest rates happened in 1979, long before Reagan became President. The inflation was caused by high oil prices which would have happened under Reagan or any President in office during that time frame.

By the time Volcker was up for reappointment in 1983 the inflation rate had already dropped drastically. President Carter gave the economy it’s bitter medicine and Reagan was there when the flu left.